Introduction

Sooner or later it happens to even the most conscientious employers. No matter how carefully they hire workers, how many incentives they give for strong performance, or how diligently they try to create a positive and productive work environment, all businesses -- large and small -- may one day have to deal with a problem employee.

You might have picked up this book because that day has already come for you. Perhaps an employee has demonstrated attitude or performance problems that won't go away or has sexually harassed other employees, stolen from the company, or threatened violence. On the other hand, you may have picked up this book because you're concerned about the bigger picture. You're frustrated with the number of employee problems that crop up year after year. Instead of simply reacting to each problem as it arises, you want to be more proactive.

Whether you're facing a specific employee problem right now or want guidance about employee problems in general, this book can help. Employee problems are not inevitable, nor must they fill you with fear or anxiety. In the chapters that follow, we provide you with the practical and legal information you need to handle the employee problems you face right now and to create policies and procedures that will reduce the number and degree of problems you face in the future. As an added bonus, the strategies that we describe in this book will make your workplace more collaborative and employee-friendly, thereby increasing morale and fostering loyalty and mutual respect. Everyone in your company will benefit from the healthier workplace these strategies will create.

The High Cost of Problem Employees

For many employers, figuring out whether and how to discipline or fire a worker is one of the most stressful parts of the job. And these concerns are well-founded -- ignoring or mishandling worker problems can be very costly, indeed. Here are some reasons why.

Lawsuits

Lawsuits brought by current and former employees are increasingly common -- and increasingly costly. According to a 2006 survey conducted by the law firm Jackson Lewis, almost half of the corporate attorneys and managers polled reported that their organization had been sued by an employee in the past year. If your company loses one of these lawsuits, it could easily have to pay tens or hundreds of thousands of dollars, even millions, to a successful plaintiff. And that doesn't even include the cost of paying a lawyer to defend you. Consider these examples:

• In 2006, a Pennsylvania jury found that Wal-Mart had required employees to work through their breaks and had not paid employees for working off the clock. Wal-Mart was ordered to pay more than $78 million to the class of employees who sued.
• A California jury awarded $61 million to two drivers for Federal Express in 2006, who claimed that they had been harassed and called derogatory names because of their Lebanese heritage. The case later settled.
• UBS was ordered to pay more than $29 million to an employee who alleged that she was belittled and denied important accounts because of her sex. UBS also had to pay sanctions for destroying important documents after the plaintiff filed a complaint with the Equal Employment Opportunity Commision (EEOC) -- and the jury was told to assume that those documents would have hurt the company's case.
• A jury ordered Metris Companies to pay its former CEO $30 million for wrongful termination in 2006; the CEO claimed he was fired because he wanted to tell shareholders that the company was for sale and under investigation by the federal government. Interestingly, the CEO had previously appeared on a list of the most overpaid executives for 2002.

Employee Turnover

If you ignore problem employees or handle workplace problems ineffectively or in a Draconian manner, you will soon have an employee retention problem. The worker who is having trouble will receive neither the guidance nor the opportunity necessary to improve, and will, in all likelihood, be fired or quit. In the meantime, your other employees -- who will have to pick up the slack for that problem worker or, even worse, have to put up with that worker's abuse and mistreatment -- will soon look for greener pastures.

So you'll hire new employees, right? Well, keep in mind that the cost of replacing a worker is much higher than you might imagine. In fact, many experts estimate that it can cost one-and-a-half times a new hire's salary to replace an employee. And the cost of replacing management workers can run even higher. Wouldn't it be easier -- and less expensive -- to hang on to the good employees you already have and to help your problem employees turn their performance around?

Poor Morale

Problem employees can really drag down the spirit of a workplace. As coworkers watch that difficult worker get away with breaking the rules, mistreating others, failing to perform or produce at required levels, or being insubordinate, they will feel resentful and unappreciated -- and perhaps even frightened if the troublemaker poses a threat to their safety or well-being.

If you don't take action to stop the down-ward spiral, you will face any number of associated problems, in addition to the employee turnover described above. You will have trouble recruiting new workers and difficulty getting the most out of your remaining employees. You might even find yourself with an epidemic of workers with poor attitudes on your hands. Workers who feel that they are being treated unfairly or taken advantage of are more likely to resort to small acts of revenge -- including theft and fraud (which, according to the American Management Association, costs businesses somewhere between $40 and $65 billion a year).

The Bottom Line

The bottom line is that problem employees hurt your company's bottom line. Lawsuits, employee turnover, and low morale cost money and reduce the productivity of your business. All that time problem employees spend harassing coworkers, arguing with you, or attending to personal matters is time spent not working. And all the time other employees spend complaining to each other about a problem worker, doing the work that should be done by that worker, and laying bets on when you will finally get up the nerve to fire him or her is likewise lost to the company.

How This Book Can Help

So what can you do about your problem employees? Plenty -- and this book can help. Here, we offer you proven strategies for dealing with the most common employment problems, legal information on your rights and responsibilities as an employer, practical tips that will help you get the job done, and information on how to avoid hiring employees who may become problems.

The information we provide will help you:

• avoid hiring problem employees in the first place
• effectively deal with specific problems that arise in your workplace
• turn problem employees into productive, valuable workers
• safely and legally terminate those employees who can't or won't improve
• tap into the potential of every employee
• promote productivity, loyalty, and camaraderie in your workforce, and
• stay out of legal trouble.

We start in Chapter 1 by examining the most common types of employee problems and by explaining what strategies might help resolve them. In Chapter 2, we explain the law of the workplace -- the basic legal rules that you must keep in mind when making employment decisions. In Chapters 3 through 6, we take an in-depth look at several management practices -- performance evaluations, progressive discipline, investigations, and alternative dispute resolution programs -- that will prevent most problems from cropping up. For those problems that do arise, these same practices will enable you to deal with them effectively and legally. Each of these chapters includes sample policies you can use in your own workplace.

For those situations in which nothing else works, we devote four full chapters to how to fire problem employees. These chapters include information on:

• how to decide whether you should fire the employee -- including whether you've done all you can to protect against lawsuits (Chapter 7)
• how to handle post-termination issues, such as references, unemployment compensation, and continuing insurance (Chapter 8)
• how to decide whether to offer a severance package (including what to include in the package and whether to ask the employee to sign a release agreeing not to sue you) (Chapter 9), and
• how to legally and safely terminate an employee, step by step (Chapter 10).

Chapter 11 will help you develop sound hiring and personnel policies to weed out the problem employees of the future. In Chapter 12, we explain how to find and work with an employment lawyer.

Who Should Read This Book

This book is for anyone who oversees employees -- that means private business owners, human resource professionals, supervisors, and managers. If you want to learn about the law; pick up practical advice, tips, strategies, and policies that will help you manage more effectively; and treat your employees fairly, this book is for you. We wrote this book with the conscientious, well-intentioned employer in mind.

Who Should Not Read This Book

This book is not for people who work in the state or federal government or agencies. Although many of the strategies that we discuss in this book could be applied to government workers, most employment laws operate slightly differently -- or not at all -- in the public setting. If you are a manager or supervisor of government employees, this book probably isn't for you.

This book is also not for people who are looking for ways to "get around" workplace laws. If you are looking for a guide that will show you how to skirt the boundaries of the law, this book won't help. Our goal is to help well-meaning employers deal with their employment problems legally and effectively -- not to help shady operators evade their legal responsibilities.